NYC pensions turn to private markets to boost cleantech portfolio

The $195 billion New York City Pension Funds is seeking investments focused on clean technology and climate change, saying private equity will play a key role in the city’s efforts to double its green-investment portfolio to $4 billion.

Mayor Bill de Blasio, Comptroller Scott Stringer, and trustees of three of the five New York City pension funds last week said they intended to double the investments of the NYC Funds in climate-change solutions over the next three years.

The new target, $4 billion, will represent 2 percent of the city’s pension portfolio and will be spread across all asset classes.

“Private equity definitely has a role to play here. Our sustainable investments stretch across all asset classes – including alternative-asset classes like private equity and real estate,” spokeswoman Tian Weinberg said.

“We will seek opportunities in renewable energy infrastructure, energy efficiency, pollution prevention and other climate solutions that meet our investment criteria and risk/return assumptions.”

The clean-technology goal builds on the city’s earlier announcement of a plan to divest from fossil-fuel-reserve owners within five years. That process is still in relatively early stages.

The comptroller’s office wants input from potential business partners and other stakeholders about how it should go about hiring a consultant to study the issue and guide divestment efforts. The office plans to share some of its findings in September.

Not all the city’s pensions are fully on board with either the cleantech goals or the divestment efforts. The initiatives have the support of three of the five pension funds: New York City Employees Retirement System, Teachers Retirement System, and Board of Education Retirement System. The Police and Fire Retirement Systems have declined to support the initiatives.

The three pension funds in favor represent 70 percent of the city’s retirement assets, Weinberg said. She added that Police and Fire had not yet taken a formal position on the initiatives.

The NYC pensions will be looking for co-investments, separate accounts and direct investments, to give it more control over these more-targeted investments in clean technology and climate solutions, according to Weinberg.

“We’re confident that the pacing we’ve established with our first goal will bring us forward to doubling our sustainable investments within three years,” Weinberg said.

“The distribution of these investments will be determined as we move forward — in consultation with the investment managers hired by” the Bureau of Asset Management.

Overall, the city pension funds have a 6 percent allocation to PE. NYCERS and Fire have higher allocations, at 7 percent of the assets of each of those systems.

New York City wants to “change the paradigm for public pension plans” and be a leader in showing that asset owners can use their investment clout to both do well for their beneficiaries and do good for the planet, according to Stringer’s announcement.

Climate change creates risks to some investments and opportunities for other investments, and it poses significant threats to New York City, Stringer said.

“The future is with big ideas in clean technology, not with big polluters,” Stringer said in last week’s announcement.

“Today we’re showing that New York City will continue to lead the way in investing in sustainable investments that offer strong returns for New York City beneficiaries.”

Action Item: Tune in to the city’s public meeting on fossil fuel divestment here https://on.nyc.gov/2O2unXC